MetLife Inc., the largest U.S. life insurer, raised its dividend 49% in the first increase since 2007, after its exit from banking limited oversight from the Federal Reserve. The company gained the most since January in New York trading.

The quarterly dividend of 27.5 cents per share is payable June 13 to shareholders of record as of May 9, the New York- based insurer said yesterday in a statement. The previous payout was 18.5 cents.

MetLife is returning capital to shareholders after scaling back the U.S. oversight that had frustrated CEO Steven Kandarian’s plans for buybacks and a dividend boost. The insurer exited bank status in February after reaching deals for the sale of deposits and reverse-mortgage and home- loan units. Smaller rivals including No. 2 Prudential Financial Inc. didn’t face the same restrictions and raised their payouts.

“This action by our board makes our dividend more competitive,” Kandarian says.

MetLife advanced $2.36, or 6.6%, to $38.15 at 12:42 p.m. in New York Tuesday. The insurer has rallied 16% this year.

As one of the largest bank-holding companies, MetLife had to submit its capital plans for Fed approval. Under the Dodd- Frank law, the Fed oversees capital at the biggest lenders to prevent a repeat of the 2008 financial crisis.

MetLife’s annual dividend has been 74 cents a share since 2007 and the insurer last authorized a buyback in 2008. The company switched to a quarterly payment this year.

Systemically important

The Fed last year rejected MetLife’s plans to repurchase $2 billion in shares and boost its annual dividend to $1.10 after finding that it would fall short of U.S. capital standards in a severe economic downturn.

MetLife has said banking rules aren’t a good fit for life insurers, which often retain policyholder funds for decades before paying benefits and may be less vulnerable to client withdrawals. U.S. insurers are mostly regulated by states.

MetLife may eventually be regulated by the Fed as a non- bank systemically important financial institution after exiting bank status, Kandarian said in December. Newark, New Jersey- based Prudential and American International Group Inc. have also said the Fed may deem them systemically important.

AIG, which discontinued its dividend in 2008, jumped 4.9% to $40.49, the most since February. Prudential climbed 3.1%.

Robert Benmosche, CEO of New York-based AIG, has said that the insurer’s ability to pay a dividend may depend on a Fed review of capital.

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